TRADE
POLICY REVIEWS: FIRST PRESS RELEASE, SECRETARIAT
AND GOVERNMENT SUMMARIESPapua
New Guinea: November 1999

Continued
reform - including further efforts to liberalize trade
and investment regimes - can increase Papua New Guinea's
economic flexibility and improve its prospects of
achieving sustainable growth. A new WTO report says that
while reliance on the tariff as the main trade instrument
has made the trade regime of Papua New Guinea (PNG) more
predictable and transparent, the economy remains
relatively weak and vulnerable to external shocks.

Continued
economic reform can help Papua New Guinea achieve
sustainable growth Back
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Continued
reform - including further efforts to liberalize trade
and investment regimes - can increase Papua New Guinea's
economic flexibility and improve its prospects of
achieving sustainable growth. A new WTO report says that
while reliance on the tariff as the main trade instrument
has made the trade regime of Papua New Guinea (PNG) more
predictable and transparent, the economy remains
relatively weak and vulnerable to external shocks. The
report adds that PNG's trading partners can assist the
adjustment process by ensuring PNG's exports a stable and
increased access to their markets.

The
new WTO Secretariat report, along with a policy statement
by the Government of PGN, will serve as the basis for the
trade policy review of PNG which will take place in the
Trade Policy Review Body of the WTO on 15 and 17
November.

The
report notes that PNG's recent economic performance has
been erratic with years of modest growth alternating with
declines in output. The economy has been adversely
affected by several unavoidable shocks, such as the Asian
financial crisis, depressed commodity prices and severe
droughts. The report adds that these difficulties have
been compounded by problems of governance, a weak
institutional structure and process, and a seeming lack
of momentum for reform. The report states, however, that
in June 1999 the PNG authorities announced the
implementation of an Economic Recovery Package, with
trade reform seen as an important means of fostering
private-sector-led growth and enhancing productivity and
competitiveness.

During
1992-97, merchandise exports and imports averaged 49% and
27% of GDP, respectively. Exports are mainly oil and
minerals (gold and copper), which account for some 60% of
exports, as well as logs and traditional agricultural
commodities, especially palm-oil products and coffee.
Imports are predominantly of manufactures, especially
machinery and transport equipment, food, fuels and
lubricants. The report notes that export balances have
fluctuated considerably, mainly in line with mining
developments. Almost three quarters of PNG's exports in
1997 went to Australia, Japan and European Union (EU)
countries, mainly German and the United Kingdom. Over
half of imports came from Australia, followed by the
United States.

Foreign
direct investment (FDI), the report says, is confined
mainly to the "enclave" mining sector.
Relatively little FDI has flowed into PNG, with Australia
as the major source. Such FDI has been unstable, and has
recently slumped due to investor uncertainty over PNG's
political and economic situation. The Government is
reviewing PNG's investment procedures, to make them more
transparent and conductive to FDI. Significant segments
of industry remain reserved for domestic investors,
although since 1995 such restrictions no longer cover
manufacturing and construction activities. Where allowed,
no foreign ownership limits apply to FDI. The report also
notes that non-PNG nationals may lease, but not own land.

The
tariff is PNG's main trade policy instrument, the report
states. Tax and tariff reform was introduced in 1999.
Specifically, a VAT was introduced on goods and services
to fund a substantial tariff reduction programme. The
average tariff was halved to under 10% and the structure
rationalized. Furthermore, the Government plans to reduce
the average applied tariff to 5% by 2006. However, the
report states that PGN's authorities increased tariffs on
some goods - including certain food and plastic products
- as from 1 July 1999, mainly to 30% or 40%, to provide
protection for domestic producers. PGN also retained
pockets of high tariff protection until 2006. In 2006,
the average tariff on agricultural products will be 16%,
on mining products 0% and on manufacturing products 5%.

The
report notes that unprocessed products are subject to the
highest tariffs, on average, and semi-processed products
the lowest. This indicates, the report states, that the
tariff structure may discourage processing, especially
from raw inputs. The report suggests that lower, more
uniform tariffs on unprocessed products could improve the
incentive structure.

The
report says that PNG applies few formal non-tariff trade
barriers. PGN has anti-dumping and countervailing
provisions but has rarely used them. Export taxes,
ranging to 70%, apply to unprocessed logs. PGN has no
export quotas or voluntary export restrains but a wide
range of exports receive tax incentives. The report notes
that be targeting manufactured goods, these schemes tend
to discriminate against other exports.

PNG
applies stringent quarantine restrictions, the report
says. Imports of vegetables and fruit that are also grown
in PNG are banned outright. Imports of many plants, such
as sugar cane, are also prohibited, while imports of
other are restricted.

PNG
is member of APEC and as such is committed to achieving
free trade and investment in the region on goods and
services by 2020. It is also a member of the South
Pacific Forum. As a member of the Melanesian Spearhead
Group, PGN grants some duty-free tariff preferences. As a
signatory to the Lomé Convention, PGN receives
non-reciprocal tariff and other preferences from the EU
on many goods as well as financial assistance. PNG is a
party to the South Pacific Regional Trade and Economic
Cooperation Agreement (SPARTECA), a non-reciprocal
preferential agreement to provide the Forum island
countries with duty-free access for their products to
Australia and New Zealand. PNG is also a beneficiary of
the GSP schemes of most industrialized economies.

Notes
to Editor

The
WTO's Secretariat report, together with a policy
statement prepared by Papua New Guinea, will be discussed
by the WTO Trade Policy Review Body (TPRB) on 15 and 17
November 1999. The WTO's TPRB conducts a collective
evaluation of the full range of trade policies and
practices of each WTO member at regular intervals and
monitors significant trends and developments which may
have an impact on the global trading system. The
Secretariat report covers the development of all aspects
of each of Papua New Guinea's trade policies, including
domestic laws and regulations, the institutional
framework, trade policies by measure and by sector. Since
the WTO came into force, the areas of services and
trade-related aspects of intellectual property rights are
also covered.

To
this press release are attached the summary observations
from the Secretariat report. The full Secretariat and
government reports are available for the press in the
newsroom of the WTO internet site (www.wto.org). The
Secretariat report, together with the government policy
statement, a report of the TPRB's discussion and the
Chairman's summing up, will be published in hardback in
due course and will be available from the Secretariat,
Centre William Rappard, 154 rue de Lausanne, 1211 Geneva
21.

The
Independent State of Papua New Guinea (PNG) is an
archipelago in the South Pacific. It consists mainly of
the eastern half of the island of New Guinea, which
borders the Indonesian province of Irian Jaya. PNG is a
developing country, rich in resources, with a GDP per
capita of some US$900 and low social indicators. The
present Government, which took office in July 1999,
inherited an economy in crisis and in urgent need of
fundamental economic reform.

PNG's
recent economic performance has been erratic with years
of modest growth alternating with declines in output. The
economy has been adversely affected by several
unavoidable shocks, such as the Asian financial crisis,
depressed commodity prices and severe droughts. These
difficulties have been compounded by problems of
governance, a weak institutional structure and process,
and a seeming lack of momentum for reform.

The
new Government appears committed to broad-based economic
reform. These reforms seek to address chronic
macroeconomic imbalances and structural deficiencies. The
Government implemented a Supplementary Budget in
August 1999 to contain the fiscal deficit. It has
re-engaged in dialogue with the World Bank and the
International Monetary Fund (IMF) to obtain support for
reform, including trade liberalization and a far-reaching
privatization programme.

After
independence in 1975, PNG adopted inward-looking policies
to promote industries to process primary resources, such
as fish and timber, and other manufactures, such as
processed foods. These interventionist policies were
manifested, inter alia, in: high and disparate trade
taxes on imports and exports, as well as import quotas
and prohibitions; a significant state role in industrial
development, including joint ventures; a relatively large
public service; and, more recently, fairly high fiscal
deficits, financed by expansionary monetary policies.

PNG's
present economic situation is difficult. Public debt is
high, as are the Government's accumulated arrears;
inflation has risen to over 20% a year, weakening
external competitiveness, and low world commodity prices
limit export earnings; external reserves are low and
foreign direct investment is confined mainly to the
"enclave" mining sector.

The
authorities recognize the need for a restoration of
confidence and in June 1999 announced the
implementation of an Economic Recovery Package. The
Package includes measures aimed at financial discipline
and structural reform. Policy under the Package is to be
outward looking, with trade reform seen as an important
means of fostering private-sector-led growth and
enhancing productivity and competitiveness. Meeting
multilateral commitments is integral to the reform
agenda; thus, for example, PNG's tariff is fully bound
and it intends to implement WTO-consistent policies in
intellectual property rights. In meeting these
commitments, PNG looks to bilateral and multilateral
donors for technical support.

In
line with the Package, tax and tariff reform was
introduced in July 1999. Specifically, a VAT was
introduced on goods and services to fund a substantial
tariff reduction programme. The average tariff was
halved, to under 10%, and the structure rationalized; the
average and maximum tariff are to be further phased down
over the period to 2006. As noted, the Government
introduced measures to contain the budget deficit to 1.7%
of GDP, from a previous target of over 3%. Donors and
international financial agencies are being approached to
fund the deficit, thus avoiding recourse to the monetary
authority; privatization proceeds are to help reduce the
public debt. Change has also been mooted to improve
governance and political accountability.

International
trade and foreign direct investment (FDI) are vital to
the PNG economy. Merchandise exports and imports averaged
49% and 27% of GDP, respectively, during 1992-97.
External balances have fluctuated considerably, mainly in
line with mining developments.

Trade
is relatively concentrated, both in commodities and
markets. Exports are mainly oil and minerals (gold and
copper), which account for some 60% of exports, as well
as logs and traditional agricultural commodities,
especially palm-oil products and coffee. Almost three
quarters of exports in 1997 went to Australia, Japan and
European Union (EU) countries, mainly Germany and the
United Kingdom. Log exports fell sharply following the
Asian crisis and the decline in world timber markets in
late 1997.

Imports
are predominantly of manufactures, especially machinery
and transport equipment, food, fuels and lubricants. Over
half of imports came from Australia, followed by the
United States.

Outside
the resource sectors, especially mining, which accounts
for some 80% of foreign equity in PNG, relatively little
foreign direct investment (FDI) has flowed into PNG. Such
FDI has been unstable, and has recently slumped due to
investor uncertainty over PNGs political and
economic situation. Australia is the major source of FDI.

PNG
is a constitutional monarchy. Legislative power resides
in a unicameral national Parliament. Executive power is
vested in the national Government. Parliamentary
elections must be held within periods of five years. The
Prime Minister is elected by Parliament and appoints
ministers to the National Executive Council, or Cabinet;
the Government can fall on a successful no-confidence
vote in Parliament. New governments have a constitutional
grace period against no-confidence votes of 18 months,
previously six months. Coalition governments have been
the norm and no government or prime minister has yet
served a full term.

Responsibility
for trade-related policies rests with the national
Government, but provincial governments have concurrent
powers with the national Government in important
trade-related areas, such as agriculture, forestry,
industrial development, fishing and mining. This is
especially true, for example, with respect to approval of
forestry, mining and fishing developments on customary
land, which cover over 90% of land ownership.

Trade
and economic policy formulation in PNG has not always
been well coordinated. An Advisory Secretary was
established in the Prime Ministers Office in
January 1999 with a view to supporting reform, including
oversight of cabinet decisions and implementation of the
1999 Budget.

The
Government promotes public dialogue through the
Consultative Implementation and Monitoring Council
(CIMC), national economic summits - last held in February
1998 - and the annual National Development Forum. The
Governments inaugural Forum, held in August 1999,
focussed on reform and the 2000 Budget. The Government
also interacts with the private sector via the PNG
Manufacturers Council and other bodies, such as the
Chamber of Commerce. No independent statutory body exists
to advise the Government on trade-related policies,
including the tariff and industry assistance; in
principle, the Industry Assistance Board has such a role,
but has lacked the necessary institutional capacity.

PNG
became a de facto GATT contracting party in 1960 under
its "UN trust" status with Australia, and
acceded to the GATT in 1994. It became a WTO Member in
June 1996. PNG's entire tariff is bound, mainly at
ceiling tariff rates of 40% and 45%. PNG scheduled
commitments under the General Agreement Trade In Services
(GATS) on a broad range of services, including certain
business, construction, financial and telecommunication
services. It is not a signatory to any of the
Plurilateral Trade Agreements.

As
a member of APEC, PNG is committed to achieving free
trade and investment in the region on goods and services
by 2020. It is also a member of the South Pacific Forum.

PNG
grants at least most-favoured nation (MFN) treatment to
all WTO Members. PNG grants some duty-free tariff
preferences under the Melanesian Spearhead Group (MSG).
These preferences initially covered imports of beef from
Vanuatu and canned tuna from the Solomon Islands; PNG
exports of tea to these countries. Fiji has since joined
the Agreement, in 1996, and more products are now
covered, such as fruit, nuts, coffee and cement. MSG
exports by PNG include mainly tinned meat, coffee and
cement. MSG trade is a minor share of PNGs total
trade, however, and the Agreement has not significantly
expanded trade within the region.

As
a signatory to the Lomé Convention, PNG receives
non-reciprocal tariff and other preferences from the EU
on many goods. Financial assistance, totalling
K 2.8 billion to end-1995, has also been
provided, mainly to fund development projects and to
finance past commodity price support schemes.

PNG
is a party to the South Pacific Regional Trade and
Economic Cooperation Agreement (SPARTECA), a
non-reciprocal preferential agreement to provide the
Forum island countries with duty-free access for their
products to Australia and New Zealand. PNG is also a
beneficiary of the GSP schemes of most industrialized
economies.

The
tariff is PNG's main trade policy instrument. Tariffs
were cut across-the-board on 1 July 1999 from an average
(unweighted) applied MFN rate of 20% to 9%. The tariff
structure was also simplified and rationalized with the
number of tariff rates reduced from six to four 
zero, 30%, 40% and 55%  by removing duties of 5% or
11% on basic and intermediate inputs and by lowering
duties ranging previously between 75% and 125% to 55%,
with some exceptions. Under the eight-year Tariff
Reduction Programme, MFN rates will be further phased
down to 15%, 25% and 40%, without exception, in 2006,
when it is envisaged that the average applied tariff will
be 5%.

However,
tariffs were increased on some goods as from
1 July 1999, mainly to 30% or 40% to provide
protection for domestic producers. These increases
included rates on certain food and plastic products.
Pockets of high tariff protection were also retained
until 2006, including current rates of 82% on sugar, 70%
on canned mackerel and 95% on plywood and veneer panels.
On some products, where domestic production was
considered non-viable, high tariff rates were reduced to
zero.

Current
duties, and the rates to apply in 2006, give rise to
substantial dispersion and some escalation. The average
tariff in 2006 on agricultural products will be 16%,
compared with zero for mining and 5% for manufacturing.
The revised tariff structure also seems to provide mixed
incentives for processing. Unprocessed products are
subject to the highest tariffs, on average, and
semi-processed products the lowest. This indicates that
the tariff structure may discourage processing,
especially from raw inputs. Lower, more uniform tariffs
on unprocessed products could improve the incentive
structure.

All
duties, with the main exception of those on alcoholic
beverages, are ad valorem, thus lending
transparency. There is widespread use of exemptions,
often to specific users, but this is being rationalized.
A duty drawback system is in operation but is little
used, with refunds often involving significant delays.
Recent efforts taken to improve the system include
relaxing approval arrangements, and there are proposals
to provide the drawback as a credit against the import
duties.

PNG
applies few formal non-tariff trade barriers. During the
1990s, high tariffs replaced widespread import quotas and
bans. Certain import prohibitions and controls apply for
environmental, health, public safety and security
reasons, and under international conventions. PNG applies
no trade embargoes, nor any local-content requirements
for domestic production.

PNG
has anti-dumping and countervailing provisions, but they
have rarely been used, although application of
anti-dumping duties is currently being considered for
cement. Specific tariffs, mainly on food items, have been
used as the main means of guarding against
"cheap" imports. However, the Government has
signalled greater use in future of anti-dumping
provisions, which are now to be administered by the
Internal Revenue Commission, within the Treasury
portfolio, instead of the Ministry of Foreign Affairs and
Trade.

PNG
applies stringent quarantine regulations. Imports of
vegetables and fruit that are also grown in PNG are
banned outright. Imports of many plants, such as sugar
cane, are also prohibited, while imports of others are
restricted. Live animals and certain animal products,
such as honey, beef, eggs and non-pork smallgoods, can
only be imported from Australia and New Zealand (and
Vanuatu in the case of beef). Fresh pig meat and pork
smallgoods are importable only from Australia, and canned
ham only from Australia, New Zealand, North American and
certain EU member States.

PNG
intends to align its national standards with
international norms; it is a member of ISO and IEC. Many
Australian and New Zealand standards are applied. Most
standards are for health and safety reasons and apply
particularly on chemicals, construction equipment, and
building hardware. PNG aims to develop national
accreditation bodies for conformity testing, based on ISO
guidelines. Test results from foreign countries are
usually accepted. PNG has no significant marking,
labelling or packing requirements.

Government
procurement is handled by the Central Tenders Board for
contracts above K 0.5 million. Preferences
exist for local suppliers on smaller contracts.

Export
taxes, ranging to 70%, apply to unprocessed logs. Export
taxes were lifted on all marine products, except
bêche-de-mer, in 1997. Export licences are required for
resource-based products, such as logs, which are also
subject to minimum export price guidelines. Exports of
certain unprocessed logs and raw rattan are banned. Other
export controls are mainly for cultural, health and
environmental reasons, or in accordance with
international conventions.

PNG
has no export quotas or voluntary export restraints, and
exports are unsubsidized. However, a wide range of
exports receive tax incentives, such as a tax exemption
for up to three years on profits from exports and an
exemption for any increases in such profits for a further
four years. By targeting manufactured goods, these
schemes tend to discriminate against other exports.

PNG
has no production subsidies. Tax concessions assist
investment and production; in addition to tariff
concessions, there are income tax holidays and other
measures, such as special write-offs and accelerated
depreciation provisions for income tax purposes. These
incentives are currently being rationalized under the
Investment Promotion Authority (IPA); some measures, such
as tax holidays provided to start-up firms under a
pioneer industry scheme, have recently been removed,
subject to grandfathering of existing incentives.

PNG
does not have specific competition law; the Government
intends to introduce a national competition policy. Price
controls apply to a range of staple items; their coverage
has been substantially reduced. They no longer apply, for
example, to bakery or brewery products and soft drinks.
Plans exist to further de-control prices. The Government
also intends to inject greater competition and private
participation into the supply of essential utilities.

The
Government is reviewing PNG's investment procedures, to
make them more transparent and conducive to FDI. A
revised National Investment Policy is currently being
introduced. Significant segments of industry remain
reserved for domestic investors, although since 1995 such
restrictions no longer cover manufacturing and
construction activities; the authorities are reviewing
the reserve list with a view to phasing it out. Where
allowed, no foreign ownership limits apply to FDI. The
Investment Promotion Authority screens and certifies
foreign investment proposals. The aim is for the IPA is
to become a "one-stop shop", facilitating
investment by moving to a simpler system of registration
and post-investment monitoring to replace the current
case-by-case approval process. Non-PNG nationals may
lease, but not own, land.

PNG
is heavily dependent on agriculture and on natural
resources, notably minerals, forestry and fish. Primary
production accounts for just over half of GDP, and some
one quarter of official employment. By contrast,
manufacturing represents 9% of GDP. Agriculture is much
more important if subsistence production is included;
some 85% of the population depends on agriculture.

Besides
mining, sectoral trade and investment policies relate
mainly to the development of targeted domestic food, wood
and fish processing industries, although, as noted, the
tariff structure tends to discourage semi-processing
activities. Trade and investment measures to support
processing include export taxes and other controls on
unprocessed timber and rattan, as well as efforts to make
logging licences largely conditional upon domestic
processing. Domestic processors receive preference in the
allocation of logging permits, and first-purchase option
on logs. The goal is to have at least 30% of logs
processed domestically by 2000, compared to around 5%
currently. Official policy is to ban log exports by 2000.
Processors of plywood and veneer boards also receive high
tariff protection, currently 95% but declining to 40% in
2006. The combination of implicit input subsidies on logs
and high import tariffs would be expected to provide
correspondingly high effective rates of assistance for
wood products.

Domestication
of the PNG tuna fishing industry is the principal
objective of the 1999 Tuna Management Plan. PNG operators
with majority domestic ownership receive preferential
access to tuna fishing licences. Longline licences for
catching sashimi tuna, for example, have been closed to
foreign entrants since 1995. Additional preferences,
including exemption from payment of licence access fees,
are granted to wholly domestic-owned vessels. The Plan
envisages a total of 100 purse seine tuna licences, with
30 going to vessels from Distant Water Fishing Nations
(DWFN) under bilateral agreements, and a fall in the
licensed annual catch for these vessels from about
250,000 tonnes currently to 128,000 tonnes. PNG
is committed to reducing the number of DWFN licences by
10% a year.

The
tuna cannery at Madang can be supplied only by PNG
fishing operators, and relies almost totally on duty-free
exports to EU markets under Lomé preferences. Previous
efforts to establish regional fishing fleets and fish
processing activities in PNG, as well as elsewhere in the
region, have failed, having been unable to compete with
more efficient processors.

Mandatory
local-content requirements apply to DWFN vessels fishing
in PNG waters. Each vessel must make at least three calls
per journey to PNG designated ports and purchase minimum
supplies worth US$90,000. PNG, along with other island
neighbours, has also banned high-seas transshipment,
which must occur in designated PNG ports. These controls
tend to raise the costs incurred by foreign fishing
fleets and reduce their capacity to pay higher licence
fees.

PNG's
fishing and forestry policies are also aimed at
sustainable management. Fish catches and timber
production, are currently below estimated sustainable
yields. Such management will require enhanced
surveillance measures to ensure that licensed levels are
enforced. The Government is also taking steps to
terminate unsustainable logging; these include
withdrawing unused timber permits, since issued permits
are thought to be double sustainable levels, and ensuring
that expired licences are indeed terminated.

Trade
measures, initially import bans and quotas, but currently
relatively high tariffs, assist a range of agricultural
commodities (including sugar, poultry, eggs and beef) in
an attempt to achieve food self-sufficiency. These
policies have met with little success, and contribute to
high domestic food prices.

Traditional
tree crops, especially coffee, copra, cocoa and palm oil
products, remain important to the PNG economy, accounting
for substantial exports. These products were assisted by
price stabilization measures, which effectively provided
substantial price support, during the late 1980s, when
export prices collapsed. These schemes were terminated in
1999, except for a private scheme run by the Coffee
Industry Corporation. The statutory Copra Marketing Board
is the monopoly seller of copra and coconut products on
both domestic and export markets.

Past
governments have promoted import substitution policies
through direct participation in numerous commercial joint
ventures, if not complete state ownership, aided by
measures such as trade restrictions or legislative
provisions preventing new entrants. Examples include
government participation in oil palm plantations,
livestock ventures, Ramu sugar and Halla cement. The
Government has divested some of these interests, however,
and intends to sell off more as part of its privatization
programme.

The
Government plays a key role in the development of mining
projects. Mining leases must be negotiated with national
and provincial governments as well as with customary
landowners. Higher standard company tax rates apply to
mining and petroleum firms than to enterprises operating
in other sectors, and additional profit taxes apply to
returns above certain threshold levels. The Government
may take a minority equity holding of up to 30% in any
mining or petroleum project, either directly or via its
51% stake in Orogen Minerals. Royalties apply, at a rate
of 2% of the value of mine output. A profits levy of 4%
has been applied to compensate for the loss in government
revenue from zero-rating mineral exports for VAT
purposes, thereby allowing mining companies  in
contrast to loggers  to receive a credit for VAT
paid on inputs.

Hitherto,
there has been minimal domestic processing of minerals. A
petroleum refinery is currently under construction; it is
expected to meet PNGs entire demand for refined
petroleum products.

Most
basic services, such as electricity, telecommunications,
ports, water, air and maritime transport, are provided by
state-owned statutory monopolies. Postal and
telecommunication services were corporatized in 1996,
with the establishment of two separate entities, Telikom
and Post PNG; however, Telikom will retain its legislated
monopoly until 2002, when PNG is committed to opening the
market to foreign suppliers, providing them with
non-discriminatory access to the local network. Post PNG
retains monopoly rights in providing certain postal
services, such as registration and insurance of articles,
although letter delivery is, in principle, open to
private entrants. It is government policy to gradually
divest 49% of both Telikom and Post PNG.

Banking
licences are granted by the Central Bank. Foreign banks
may operate domestically as locally incorporated
subsidiaries or as foreign branches, provided an assigned
minimum level of capital is kept within PNG. The Central
Bank accepts that PNG branches of reputable foreign banks
will be adequately supervised by those banks' own
domestic prudential regulators.

Foreign
companies may enter the PNG insurance market without
discrimination; non-life firms must be licensed with the
Insurance Commissioner. However, the Motor Vehicle
Insurance Trust has a statutory monopoly on providing
third-party motor vehicle insurance. Although foreign
companies are expected to place all risks within PNG,
such risks may be placed offshore, subject to approval
from the Insurance Commissioner. In 1997, some 20% of
gross non-life insurance premiums were placed abroad.

Life
insurance companies and superannuation funds are
currently unregulated. However, legislation is planned
that would extend prudential controls to these companies
and strengthen existing requirements for non-bank
financial institutions.

The
Securities Commission was established in 1998 to
administer new companies and securities legislation, such
as that dealing with company law and the formation of
companies as well as takeovers and acquisitions. The PNG
Stock Exchange commenced operations in 1999.

PNG's
trade measures are generally applied on a
non-discriminatory basis. Reliance on the tariff, which
is fully bound and has been simplified, as the main trade
instrument has made the trade regime more predictable and
transparent. The economy, however, remains relatively
weak and vulnerable to external shocks. Continued reform,
including further efforts to liberalize trade and
investment regimes, can increase the economy's
flexibility and improve its prospects of achieving
sustainable growth. PNG's trading partners can assist the
adjustment process by ensuring stable, increased access
to their markets.